Mayor warns of London brain drain caused by steep house prices in capital

Khan is worried the capital is unaffordable for many buyers (Source: Getty)

Helen Cahill

Sadiq Khan fears London businesses could be hit with a “brain drain” if staff are unable to achieve their ambition of owning a home.

The London mayor has warned that top bosses see the housing crisis as the primary barrier to doing business in London.

In an exclusive interview with City A.M., Khan said: “The biggest issue raised to me by chief executives and other employers is the housing crisis – the fact that they can’t get staff in London because of the cost of housing.

“That is why we are trying to rapidly increase the number of genuinely affordable homes in London. It is crucial, because otherwise Londoners aged between 30 and 40 are leaving London because they want to buy a property, go from a flat to a home, and what you don’t want is a brain drain,” Khan added.

Last year, City A.M. revealed that Accenture, EY, Deloitte and PwC were receiving record applications for jobs in regional cities, with graduates citing “lifestyle considerations” as a reason for living outside London.

In December, the average house price in London hit £484,500, according to figures from the Office for National Statistics, an increase of 2.5 per cent year-on-year. Experts have predicted that affordability concerns will put a hard cap on further house price rises.

When Khan became mayor in 2016, he promised to step up house building to deliver 65,000 homes a year, and said that half of new homes should be affordable housing. Khan’s expectation is for half of homes on a development to be affordable, but he will fast-track schemes through the planning system if they offer 35 per cent affordable housing, a decision he says the industry has welcomed.

However, the private sector has built an average 25,000 homes a year in the past decade, and Khan has said the government must “absolutely” start building houses through joint ventures to increase construction.

“The private sector will not go from 30,000 to 60,000, including supply and demand,” he said. “The state has got to step in.”

Khan has backed an intervention by Conservative housing and communities secretary Sajid Javid, who last week suggested a standardised approach to valuing land.

“We’ve got to make sure you’re not paying too much for land,” Khan said.

“It’s a combination of intervention by Sajid Javid, our draft London plan, and with developers and landowners, [which] should hopefully, over a period of time, mean that the value of land doesn’t increase as it has done over the last 10 to 20 years in London.”